Earlier in December 2010, JPM, which was the primary banker to Madoff Securities, had been sued for $6.4 billion including $1 billion in transfer and claims. At that time, the company was accused of violating banking laws and defrauding federal regulators.

Now in revised charges, the trustee alleges that JPM ignored various signals of fraudulence as billions of dollars were transferred from Madoff’s account to investors without any legitimate business purpose. The company neither notified the regulators of these shady transactions nor properly disclosed about the assets and liabilities.

Further, the trustee alleged that in the 2005 report, instead of revealing $100 million in securities, the Madoff fund recorded only $72.2 million. JPM should have pointed out the discrepancy as this $100 million was the collateral to a loan issued by the company to Madoff Securities.

Additionally, the trustee also seeks a compensation for $400 million in fraudulent transfers and another $500 million in revenue that JPM earned from its association with the fund. JPM will have to respond to the revised complaint by August 1, 2011.

However, a JPM spokesperson commented that the company was neither aware nor a part of the fraud that was started by Madoff in its Ponzi fund scheme. JPM has also stated that as a trustee, Mr. Picard’s duty is to investigate the Madoff fraud instead of filing lawsuits against the company. In 2009, Mr. Madoff had pleaded guilty to running a Ponzi scheme and is presently serving a 150-year prison sentence.

JPM is not the only one to have been sued by the trustee. There are nearly 1,000 lawsuits filed by the trustee in the bankruptcy court in order to recover about $90 billion from various banks and other Madoff investors who profited from the fraud. Major companies among them include HSBC Holdings Plc (HBC), which was sued for $9 billion, and UniCredit SpA, a defendant along with Bank Medici AG and its founder Sonja Kohn, who was sued for $59 billion.

Further last week, JPM agreed to pay $153.6 million to settle charges with the U.S. Securities and Exchange Commission (SEC). The SEC had alleged the bank of misleading investors in a synthetic collateralized debt obligation (CDO) known as Squared CDO 2007-1 that was tied to the U.S. housing market.

While such lawsuits and charges dent JPM’s reputation and its financials, we believe that these are a relief for investors who have lost their hard-earned money in fraudulent investments. Therefore, such steps from regulators are being greeted warmly by investors.

The shares of JPM currently retain a Zacks # 3 Rank, which translates into a short-term ‘Hold’ rating.